What is Elder Ray Index?
The Elder Ray Index is a specialized oscillator developed by renowned trader Alexander Elder. It is designed to measure the underlying buying and selling pressure within a specific market trend, helping traders identify momentum shifts.
How it works
The indicator calculates two distinct values: Bull Power and Bear Power. It subtracts an Exponential Moving Average (EMA) from the daily high and low prices. This reveals how much strength the bulls and bears possess relative to the average price level.
Trading signals
- Bullish signals: Occur when Bull Power crosses above zero or displays higher lows during an uptrend.
- Bearish signals: Appear when Bear Power falls below zero or shows lower highs during a downtrend.
- Divergence: Identifying mismatches between price action and the oscillator can signal potential reversals.
Basic settings
Users typically use a 13-period EMA as the baseline. You can modify this period to suit different timeframes or volatility levels. This content is for educational purposes only, not financial advice.
